Exhibit 10.13


 


NORTHERN
TECHNOLOGIES INTERNATIONAL CORPORATION


 


DESCRIPTION
OF NON-EMPLOYEE DIRECTOR


COMPENSATION
ARRANGEMENTS


 


Overview


 


NTIC’s non-employee directors
currently consist of Pierre Chenu, Tilman B. Frank, M.D. Soo Keong Koh, Ph.D.,
Donald A. Kubik, Ph.D., Sunggyu Lee, Ph.D., Mark M. Mayers, Ramani Narayan,
Ph.D. and Mark J. Stone. We use a combination of cash and long-term
equity-based incentive compensation in the form of annual stock option grants
to attract and retain qualified candidates to serve on the Board of Directors.


 


Annual Retainers; Meeting Fees


 


Each person who is a
non-employee director receives an annual retainer of $10,000 for services
rendered as a director of NTIC.  The
annual retainer is paid quarterly.  NTIC’s
Chairman of the Board receives an additional annual retainer of $15,000, the
Chair of the Audit Committee receives an additional annual retainer of $5,000
and other members of the Audit Committee received an additional annual retainer
of $4,000.  Each of our non-employee
directors also receives $1,000 for each Board and strategy review meeting
attended and $1,000 for each Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee meeting attended.  No director, however, will earn more than
$1,000 per day in Board, Board committee and strategy review meeting fees.  Any director that is an employee of NTIC (G.
Patrick Lynch) does not receive any retainer or Board or Committee meeting
fees.


 


As part of NTIC’s cost
reduction efforts, commencing in March 2009, NTIC’s annual cash retainers
and meeting fees were reduced temporarily by 10%.  This reduction remains in effect as of the
date of the filing of this report.


 


Stock Options


 


Each of non-employee director
is automatically granted a five-year non-qualified option to purchase 4,000
shares of NTIC common stock in consideration for their services as directors of
NTIC and the Chairman of the Board is automatically granted an additional
five-year non-qualified option to purchase 2,000 shares of NTIC common stock in
consideration for his services as Chairman on the first day of each fiscal
year.  Each non-employee directors who is
elected or appointed to the Board following the first day of the fiscal year
receives an automatic grant of an option to purchase a pro rata portion of
4,000 shares of NTIC common stock calculated by dividing the number of months
remaining in the fiscal year at the time of election or appointment divided by
12, which options are automatically granted at the time of the new director’s
election or appointment. Each automatically granted option becomes exercisable,
on a cumulative basis, with respect to one-third of the shares covered by such
option on each one-year anniversary of the date of its grant.  The exercise price of such option is equal to
the fair market value of a share of NTIC common stock on the date of
grant.  All such options are granted
under the Northern Technologies International Corporation 2007 Stock Incentive
Plan.


 


Reimbursement of Expenses


 


All of directors of NTIC are
reimbursed for travel expenses for attending meetings and other miscellaneous
out-of-pocket expenses incurred in performing their Board functions.


 


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Indemnification Agreements


 


NTIC has entered into
agreements with all of its directors under which NTIC is required to indemnify
them against expenses, judgments, penalties, fines, settlements and other
amounts actually and reasonably incurred, including expenses of a derivative
action, in connection with an actual or threatened proceeding if any of them
may be made a party because he or she is or was a director of NTIC.  NTIC will be obligated to pay these amounts
only if the director acted in good faith and in a manner that he or she
reasonably believed to be in or not opposed to NTIC’s best interests.  With respect to any criminal proceeding, NTIC
will be obligated to pay these amounts only if the director had no reasonable
cause to believe his or her conduct was unlawful.  The indemnification agreements also set forth
procedures that will apply in the event of a claim for indemnification.


 


Consulting Arrangements


 


NTIC paid consulting fees to
Bioplastic Polymers LLC, an entity which is owned by Ramani Narayan, Ph.D., in
the aggregate amount of $100,000 and royalty fees in an aggregate amount of
$2,510 during the fiscal year ended August 31, 2009.  The consulting
services rendered by Bioplastic Polymers LLC related to research and
development associated with various new technologies.  The royalty fees
were paid pursuant to an oral agreement pursuant to which NTIC has agreed to
pay Bioplastic Polymers LLC and Dr. Narayan in consideration of the
transfer and assignment by Biopolymer Plastics LLC and Dr. Narayan of
certain biodegradable polymer technology to NTIC, an aggregate of three percent
of the gross margin on any net sales of products incorporating the
biodegradable polymer technology transferred to NTIC by Bioplastic Polymers LLC
and Dr. Narayan for a period of 10 years, provided that if a patent for or
with respect to biodegradable polymer technology is issued before the
expiration of such 10 year period, then NTIC will until the expiration of such
patent pay to Bioplastic Polymers LLC and Dr. Narayan an aggregate three
percent of the biodegradable polymer technology gross margin attributable to
such patent.


 


In May 2009, NTIC entered
into an agreement with DAK Engineering, LLC (“DAK”), an entity owned by NTIC’s
former Chief Technical Officer and, Donald A. Kubik, Ph.D., effective as of June 1,
2009. Pursuant to the agreement, NTIC has engaged DAK to perform certain
services to NTIC, specifically services in the area of chemistry, technology
development, supplier technical issues, production issues, product performance
characterization, and other forms of commercializing intellectual property
rights. In consideration for such services, NTIC has agreed to pay DAK a
monthly fee of $7,250. The agreement may be terminated by either party for any
reason with 30 days prior notice before the quarter end by providing written
notice to the other party and may be terminated upon the occurrence of other
certain events, as set forth in the agreement. The Agreement also contains
other standard terms, including provisions regarding confidentiality,
non-competition and non-solicitation.


 


In May 2009, NTIC entered into a technology
transfer and consulting agreement with Sunggyu Lee, Ph.D., a director of NTIC,
pursuant to which NTIC agreed to pay Dr. Lee $30,000 payable in six $5,000
monthly installments in exchange for an 18-month option to purchase certain
technology developed by Dr. Lee.  If
NTIC decides to exercise the option, Dr. Lee has agreed to transfer to
NTIC the technology and to provide NTIC consulting services related to the
further development and commercialization of the technology in exchange for an
additional $120,000 payable in eight $15,000 monthly installments.  If NTIC commercializes any products or
services that incorporate the transferred technology or any other new related
inventions developed by Dr. Lee during the term of the agreement and
transferred to NTIC under the agreement, NTIC has agreed to pay Dr. Lee a
royalty of three percent of any earnings before interest and taxes to NTIC
generated from the commercial exploitation by NTIC of any products or services
that incorporate the technology and/or inventions.  Such royalties will be required to be paid
until the earlier of the last to expire of any applicable patents covering such
technology or inventions, the invalidity of such patents, or if there are no
issued patents covering such technology and inventions, 10 years from the first
date of commercial sale or license.   The
agreement may be terminated by NTIC if, at any stage, NTIC determines in its sole
discretion not to proceed with the project.


 


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